Business interview: African queen Runa Alam on hunting returns where others fear to tread

Partly that’s because of the very few companies of scale to excite the buyout behemoths.

Consultant McKinsey’s much-studied Lions On The Move report highlighted in 2016 that Africa has no firms in the Fortune 500, and just 400 firms with annual sales of $1 billion-plus. Since 2013, the continent has seen roughly $5 billion a year of PE money invested, but last year the spending eased to $3.5 billion, hinting at a loss of momentum.

Alam isn’t having any of that, though.

A recent Brookings Institute study estimated $2.5 trillion of consumer spending in Africa by 2030, more than doubling the 2015 level.

Unlike the West, Africa has demographics in its favour.

On the Brookings numbers, she says: “In 2035 there will be as many people going for their first job in Africa as the rest of the world combined. Why does that matter? Because young populations create productivity and economic growth. It’s not as fantastical as it sounds.”

That’s why, she argues, more money will come in, especially as six of the 10 fastest-growing economies in the next decade will be African. “When you have these growth rates and the demographics it has to happen. On the other side industries and companies in Africa are also growing. We used to be able to invest in the larger part of the mid-cap [space] with $15 million 20 years ago. Today that would cost $50 million-$70 million because the companies are bigger.”

The key is a burgeoning middle class.

She continues: “The key to Africa is the things we take for granted here in the UK, a bank account, life or car insurance, buying processed foods, branded pharmaceuticals, sending your child to university — these are growing products with growing demand. As the income level is growing there is more demand for that... these are things that have been done everywhere in the rest of the world.”

Hence DPI’s targeting of financial services firms like West African bank and insurer Banque Atlantique. Or the $1.85 billion telecoms towers firm Eaton Towers it’s just sold out of in one of the continent’s biggest PE exits. Or its Nigerian Food Concepts group, which has the fastest-growing chicken franchise in West Africa.

The pace of growth is such that entire industries have been leapfrogged, like landline telephones, for example. That said, DPI is still choosy: for its second fund it looked at over 1000 deals and invested in just 13.

Alam has a personal angle on bringing capital into lesser-developed countries. The daughter of two university professors, she grew up mostly in Bangladesh but left at the age of 11 after “a bad, brutal year” when the nation fought bloodily for independence from Pakistan. The family moved to Iowa, but when she applied to Princeton University to study development economics, she wrote on her application that she “wanted to rebuild Bangladesh”.

After university she cut her teeth in investment banking at Morgan Stanley and Merrill Lynch, drumming into herself the elements of finance and business over 90-hour weeks.

An eventful spell back in Dhaka followed in the late Nineties at investment bank Peregrine, when she was among dozens of people who had arrest warrants against them after a burst bubble in the Bangladesh stock market.

The case was decried as politically motivated and later quashed, although the temperature in the room gets chilly when I ask her about it. She says “there was never any wrongdoing” and “it’s something I’ve never given an interview on and I don’t want to”.

Back in the US, she wanted to stay in emerging markets, running three Africa-focused funds before founding DPI in 2007 with Miles Morland, who has been investing in Africa for 30 years.

Between them they have a firm at odds with a male-dominated private-equity sector. More than 40% of its team is female, and she adds “there has been a lot of data on diversity leading to higher returns”. With two teenage children, her family (and golf) is the main priority outside DPI but her buyout firm will keep on amassing its firepower.

She says: “DPI will grow with the continent. To stay relevant our funds will slowly increase in size. We will become bigger over time. And then we’ll see what else is to be done.”